The impact of enterprise systems on corporate performance: A study of ERP, SCM, and CRM system implementations

Abstract

This paper documents the effect of investments in Enterprise Resource Planning (ERP), Supply Chain Management (SCM), and Customer Relationship Management (CRM) systems on a firm's long-term stock price performance and profitability measures such as return on assets and return on sales. The results are based on a sample of 186 announcements of ERP implementations, 140 SCM implementations, and 80 CRM implementations. Our analysis of the financial benefits of these implementations yields mixed results. In the case of ERP systems, we observe some evidence of improvements in profitability but not in stock returns. The results for improvements in profitability are stronger in the case of early adopters of ERP systems. On average, adopters of SCM system experience positive stock returns as well as improvements in profitability. There is no evidence of improvements in stock returns or profitability for firms that have invested in CRM. Although our results are not uniformly positive across the different enterprise systems (ES), they are encouraging in the sense that despite the high implementation costs, we do not find persistent evidence of negative performance associated with ES investments. This should help alleviate the concerns that some have expressed about the viability of ES given the highly publicized implementation problems at some firms. #

The Association between Information Technology Investments and Audit Risk

“…The use of IT provides complete, transparent, and timely information for managerial decision making (Klaus et al 2000;Hendricks et al 2007;Bendoly et al 2009). For example, an empirical study by Hodge et al (2004) shows that companies that implement search-facilitating technologies (e.g., XBRL) improve the transparency of their financial statements.…”

“…A growing body of literature provides evidence that IT enhances transparency of operations, decreases intra-and inter-firm transaction costs, improves managerial decision making, increases firms' operating efficiency and also firm value (e.g., Klaus et al 2000;Hendricks et al 2007;Kobelsky et al 2008;Bendoly et al 2009;Masli et al 2011;Mithas et al 2011Mithas et al , 2012Tambe and Hitt 2012). However, several researchers find that the effect of IT on firm performance may be either mixed or subject to contingencies (Aral and Weill 2007;Xue et al 2012).…”

Patterns in enterprise management software

“…Thus, through the implementation of an ERP system, both small and medium-sized businesses and large businesses can cope with change with more rapidity and ease, and managers can access the necessary information anywhere thanks to modern information systems (cloud-based, open source ERP or electronic business systems) [Deshmukh, 2015;Hendricks, 2007].…”

“…Integrating information through ERP software is considered to be an important asset for modern businesses [Park, 2007, Schulte, 2015. ERP systems are considered complex information systems that allow information flows between different subunits of an enterprise located differently from the point of view of the area but also within the departments thus allowing for strategic and competitive advantages [Hendricks, 2007;Basoglu, 2007]. These advantages are also considered in terms of more efficient management of enterprise resources and rapidity in decision making [Davenport, 1998, Malhotra, 2010.…”

The Impacts of Enterprise Resource Planning Systems on Firm Performance: An Empirical Analysis of Chinese Chemical Firms

“…In addition, controlling for vendor selection, implementation goals, modules implemented and implementation time period helps explain the effects of ERP implementation on frrm performance [5). Hendricks et al investigate the effects of investing in ERP, SCM and CRM on a firm's stock price, return on assets and return on sales and provide insufficient evidence to support a positive relationship between firm performance and the investments of ERP, SCM and CRM [6). Most of the above literature chooses some fmancial ratios as performance indicators, while some also considers the firm's gains on stock market.…”